Routes to Carbon Neutrality in China

10.21.21 | Blog | By:

Since China elevated the concept of “ecological civilization” to the level of national policy in 2012, the country has made great strides in tackling air pollution, with severe smog almost a thing of the past. The energy transition has also seen successes, with the proportion of coal in the primary energy mix falling year after year and renewables powering forwards. China’s conservation efforts have also delivered visible result, with achievements in greening and afforestation noted around the world.

All this has given the outside world the impression that environmental governance in China is a top-down process, with central government setting clear directions and pathways, as if someone presses a button in Beijing and environmental improvements unfold across the nation. China’s commitment, made in September last year, to carbon neutrality by 2060 reinforced that appearance. So will clear signals and strong policy interventions by central government make China’s low-carbon transition a sure thing, with no uncertainties ahead?

Such expectations have influenced the response to the 14th Five Year Plan for economic and social development (FYP), released in March this year. Some have said that, with central government so determined to pursue carbon neutrality, the plan should have set much more ambitious emissions reduction targets. But Wang Yi, a member of the Standing Committee of the National People’s Congress and vice president of the Chinese Academy of Sciences’ Institutes of Science and Development, says that China has no easy route to carbon neutrality. Numerous uncertainties remain, and the road ahead will be constructed along the way, through reforms and trial and error. In an interview with China Dialogue, Wang Yi says that China should approach the task as an opportunity to “learn by doing”, with the five years of the 14th FYP used to set the stage for carbon neutrality work in the next 40 years.

China's 14FYP big climate goals

China Dialogue: The world has high hopes for China during the 14th FYP period. This will be the first FYP since its carbon neutrality announcement. What can you tell us about China’s overall environmental mission during this period?

Wang Yi: We should look at the 14th FYP in a historical context. China started small-scale end-of-pipe treatment of pollution in the 1980s. After 1998, the government was able to conduct large-scale clean-up campaigns against major environmental problems. By the time of the “ecological civilization” era, we had seen huge economic growth and better management and policy capabilities, allowing policymakers to pursue a more systematic approach to environmental protection and high-quality development through top-level policy design, rather than chasing after pollution problems.

But a systematic approach required strong levers.

The dual carbon targets – peak carbon by 2030 and carbon neutrality by 2060 – are such levers. They give China a medium- to long-term vision and a platform for implementation. Achieving carbon neutrality will mean systemic energy, environmental, social and economic reforms. Production, consumption, distribution and trade will all see change and innovation during this transition, creating a new alignment of development, security and the national interest under the umbrella of carbon neutrality. The transition will take place across four decades. There will be many opportunities and challenges along the way, and it can be seen as a new Long March. No other goals have been so systemic and so directional. The impacts the dual carbon targets have will be complex and far-reaching.

My expectation is that for the 14th FYP period, and perhaps for longer, the dual carbon targets will become the core issue and aim during construction of the ecological civilization. This will guide innovation, force reforms, and promote a comprehensive green transition and the sustainable development of society and the economy.

The targets were announced in September last year, and the 14th FYP was released only six months later, meaning there was not enough time for full research and consideration of the issue in the FYP. This explains why new policies have continued to be released, with clarifications and toughening up of targets. That process will continue, with new Guiding Opinions from the central government and accompanying plans in the future.

Why does the construction of an ecological civilization require systemic and structural reform?

In terms of economic development, China, the largest developing economy, is moving from being a middle-income country, to a high-income country, and trying to achieve more balanced, better quality development. In doing so, it must upgrade its development goals and developmental modes to match a much more advanced economy. That can’t happen without a systematic transition and structural reforms.

Take environmental protection for example: we’re at a point where further improvements will be difficult without structural reforms. We’re reaching the end of what we can do with end-of-pipe approaches. The low-hanging fruit have already been picked. Look at PM2.5 [fine particulate matter pollution] levels: after years of hard work, Beijing has got those down to 38 micrograms per cubic meter, from over 80 just six years ago. But bringing that number lower will be hugely difficult, unless we reduce fossil fuel use, and in particular coal use, in Beijing and the surrounding provinces. You can’t do that with end-of-pipe approaches. We need reforms and substitutions both in industry and in energy.

Looking forward, I think China needs to take an overall view on global development and seize this opportunity for a revolution in industry, energy and governance, pushing forward with a comprehensive social and economic transition. This would include the structural reforms we often talk about in energy, industry, transportation and land use, but also in trade, consumption and management systems. Of course, resolving environmental and resource issues is a gradual process. It needs to be appropriate to the stage of development, suitable to local conditions, practical and realistic.

14th Five year plan climate-targets

What structural reforms can we expect to see in the energy and environmental sectors during the 14th FYP?

We need to complete the targets and goals set in the 14th FYP Outline, but more importantly think about our roadmap for the coming 40 years. The direction we’re going is clear, but the actual route we’ll take is less obvious. We need to explore that route, with theory and practice feeding into one another. It will require strategic guidance and innovation.

The next decade is crucial for our transition to carbon neutrality. One aspect of this is that we need to put systems in place and make structural adjustments in line with our timelines and roadmaps, embedding the dual carbon targets in all aspects of our transition to an ecological civilization. Another is the need to identify regional and sectoral opportunities, and act on those. I describe this as a four-track process.

The first track is science. Our scientific understanding of the dual carbon targets is not yet adequate, particularly in terms of the complexity and enormity of the task, and the opportunities it presents. We need to reach a scientific consensus, understand the transition to carbon neutrality, analyse our strengths, our weaknesses and our current circumstances, then think about our future competitive advantages, uncertainties and possible options. We also need to come up with a comprehensive system-level strategy for the transition, to plan and coordinate across different stakeholders and their actions, scientifically allocate resources to numerous tracks of technological innovations to coordinate their progress and avoid risks.

The second track is legislation. There are no top-level laws and regulations in place supporting the dual carbon targets. Central government needs to plan and coordinate the creation of management mechanisms and improve those through deeper reform. Top-level guidance could provide the basis for the drafting and revision of legislation, regulations and standards for combatting climate change and achieving carbon neutrality, and for the coordination of related policy measures, providing legal guarantees for the targets to be met on time.

The third track is action. Action on carbon neutrality needs to be rolled out now, to prevent near-term behaviour locking in long-term carbon emissions and producing stranded assets and bad debt risks. For example, by expansion of coal-fired power or the coal-chemical industry, or investment in energy-hungry and polluting sectors. Priority action plans can be drafted on a regional and sectoral basis.

The fourth track is cooperation. Combatting climate change is a global goal, providing a global public good. It requires international cooperation, as well as coordination within China. As a responsible nation, and the world’s largest developing economy, China should play a leadership role, using multilateral mechanisms and various platforms to promote international cooperation on climate change, bolster South-South cooperation, and bring about global carbon neutrality as soon as possible.

What are the key areas for reform?

One fundamental mission for the 14th FYP period is optimising spatial planning for development and conservation. We need to think about how to integrate the new dual carbon targets into the existing spatial planning system, which categorises land to be used for urbanisation, agriculture or provision of ecological functions. The aim will be to boost carbon storage in ecosystems and to adopt policies on mixed land use which leave space for construction of large-scale renewable energy systems, in an effort to modernise while working in concert with nature.

Also, the 14th FYP called for the building of a “modern energy system” which is clean, low-carbon, safe and efficient. Since then, the Central Financial and Economic Affairs Commission has gone further with a call for “building a new type of power system with renewables at the centre.” China has not yet decoupled economic growth and energy consumption. But its per-head primary energy consumption is only 3.5 tonnes of standard coal equivalent, compared to the 6 tonnes average for OECD nations. In 2020, per-head electricity consumption was 5,300 kilowatt hours (kWh), with less than 800 kWh of that being household use. In high-income nations those figures are 7,000-8,000 kWh and 2,000 kWh, respectively. There’s a big gap there, and there’s no doubt China has room to grow.

The basic idea of the transition is to electrify end-user energy consumption, and decarbonise the electricity system. That means big increases in demand for electricity, with different models predicting that per-head electricity consumption will reach between 7,500 and 15,000 kWh. Whatever happens, we need a vast electricity system able to deliver between 15 and 20 trillion kWh every year. That means building generating capacity, energy storage, smart grids, distributed generation, intelligent energy and land use planning systems. Given current technology, and assuming 80% of that comes from non-fossil fuels, it’s hard to see any clear one-off solutions at this moment. We need to find answers through a process of reform, practice and innovation.

Is there a precedent to refer to for a transition of such scope and scale?

There is no precedent for an economy the size of China’s to transition to carbon neutrality over three or four decades, while continuing to grow. No other country can show us the way. This is why I say we need to “learn by doing”. The developed nations have mature consumer economies. They’ve effectively reached peak carbon and their routes to carbon neutrality aren’t limited by development goals or the challenges of rapid structural reforms. But China must make huge, regionally diverse and interconnected structural changes. The “dual-circulation” development model [which focusses both on cultivating domestic markets and on promoting international trade] means China will remain open to international trade and investment, while also maintaining a percentage of manufacturing in its economy. There are no precedents to refer to as we upgrade our industrial and energy sectors.

Also, the regional variances within China mean that we need to consider “common but differentiated responsibilities” within China, and avoid taking a one-size-fits-all approach to ensure a just transition. It took decades to reinvigorate heavy industrial areas in Germany’s Ruhr Valley, Pittsburgh in the US, and Tokyo Bay in Japan. Combining that with carbon neutrality means twice the difficulties, making this a hugely challenging undertaking. Energy-producing and heavy-industrial regions and sectors will need more resources, more time and space, to help them make the transition in a fair way.

Currently most of our roadmaps to carbon neutrality are based on modelling of scenarios. Actual implementation is still distant. Achieving carbon neutrality will require a combination of targets, policies, actions and roadmaps. That process will include disagreements, learning and trial-and-error. Again, this is why I talk about learning while doing.

Given the route ahead is so unclear, what parts of the 14th FYP could be classed as “route-finding” or “exploratory”?

The top priority is reforming the power sector. Energy is the core of all structural reforms, be it in the energy sector itself, industry, transportation or land use. And in the energy sector, the core issue is electricity. Building a renewables-centred energy system requires reforming its components, including the transmission and distribution of electricity. The carbon emissions trading platform [which began trading on 16 July] is also focused on the electricity sector.

An orderly peak and decline in coal use is also key. The 14th FYP will see coal mining concentrated in resource-rich provinces, a structural adjustment to industry and land use. The biggest benefit of this change will be more effective control of the scale of coal mining, and more efficient use of coal. Those provinces have higher quality coal, and there’s no cost-effective route for them to reach peak carbon in the short run. So by concentrating coal mining into these provinces, China will increase the efficiency of resource allocation [by prioritizing the use of high-quality coal], and allow for economy of scale in future decarbonisation solutions, such as carbon capture, utilisation and storage (CCUS). The government has also announced strict limits on coal power projects and growth in coal use during the 14th FYP period, with gradual reductions due during the 15th FYP period (2026-30). That provides a timetable on which to plan an orderly withdrawal.

The institutional arrangements for the dual carbon targets will also need constant exploration and review, with gradual adjustments. Currently, the 14th FYP sticks to the “dual controls” method, with carbon intensity targets given priority, and carbon emission caps in a supporting role.

Personally, I see this as a transitional policy, as China doesn’t yet have an overall carbon emissions cap, so we need continuity of policy and institutional arrangements which resolve the temporary lack of a cap on carbon emissions. Given that the dual carbon targets are primarily controls on fossil fuels, and coal use in particular, towards the end of the 14th FYP and during the 15th FYP period we should consider shifting to a carbon emissions cap system.

Currently, the existing electricity market, carbon market, energy rights market and energy-saving market need to be optimised and integrated, shifting towards a carbon-centred trading market.

You mentioned optimising spatial planning for development and conservation. What reforms and advances will we see in this area during the 14th FYP?

We need to look at China’s nature reserve system again, taking into account both harmony between man and nature and the requirements of the dual carbon targets, to improve top-level design and integrate the system’s core mission.

I think that future development of the nature reserve system should stick to the direction and principles of reform as laid out in the central government reform document; and also respect natural and scientific rules and regional characteristics, with a more flexible policy implementation used to avoid too much arbitrary interventions. In particular, how can we increase ecosystem carbon storage in a cost-effective way and adopt more nature-based solutions? At the same time, a mixed land use policy would allow building of renewable energy facilities in some protected areas, to support the national carbon neutrality goal.

The setting up of national parks and reorganisation of protected areas should be based on a legal foundation. Ideally, the legislative system for nature reserves should be headed up by a nature reserve law, with rules and regulations for categories of protected areas such as national parks, nature reserves and nature parks, backed up by various plans and standards. This would provide solid legal backing. Meanwhile, the National Park Administration should be spun off from the National Forestry and Grasslands Administration and placed directly under the State Council, and given responsibility for overall planning and management of national parks and other protected areas.

Originally published on China Dialogue at this link.

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